China Fund Board Continues Waste of Stockholder Assets

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Published: Apr 27, 2018 8:42 a.m. ET

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Board Continues Frivolous Litigation and Prevents Stockholders from Exercising their Fundamental Right to Vote

COATESVILLE, Pa., April 27, 2018 /PRNewswire/ -- City of London Investment Management Company Limited, which represents clients who are the beneficial owners of approximately 27.6% of the outstanding shares of common stock of The China Fund, Inc.
CHN, +0.17%
today commented on China Fund Board's continued waste of stockholder assets and actions to prevent stockholders from exercising their fundamental right to vote.

City of London believes the Board has breached their Fiduciary Duties by Preventing Valid Votes of Stockholders from being Counted.

The Board postponed China Fund's 2018 annual meeting of stockholders twice, just days before the scheduled meeting dates, and has publicly stated they may postpone the meeting again. Why else would the meeting be postponed except to prevent Joe Rogers and Richard Shore from losing their seats on the Board and preventing stockholders from exercising their statutory right to terminate the Investment Management Agreement?

We believe the Board is not acting in stockholders' best interests, but to preserve Joe Rogers' position as Chairman of the Board. Under Joe Rogers' leadership, China Fund has a lagging record of disappointing performance and bad Board decisions. It is time for new leadership.

It is imperative that the Board permit the votes to occur on May 23, 2018. If the City of London nominees are elected, Joe Rogers and Richard Shore should be replaced on the Board in accordance with the stockholder vote.

China Fund has Engaged in a Pattern of Wasting Stockholder Assets in an Unprecedented Manner with Litigation in Two Courts Designed to Block the Stockholder Vote. The Board is using fund assets for litigation expenses – these are your assets that they are spending to block your vote.

Wasteful Litigation in Federal Court in New York

After the first annual meeting postponement, the Board filed a lawsuit against City of London, China Fund's largest stockholder, in the United States District Court for the Southern District of New York (SDNY Court) in an apparent attempt to obstruct stockholders' rights and to further entrench themselves.

The SDNY Court denied in full China Fund's motion for a temporary restraining order, expedited discovery and preliminary injunction, finding China Fund's claims challenging City of London's proxy materials to be without merit.

China Fund then moved, in the appellate court, for an expedited review, which was denied. Despite this denial, China Fund prepared and filed a 57-page brief with the appellate court.

Despite two denials, China Fund submitted an "Emergency Motion" for reconsideration of the denial of the expedited review, which was denied. How much will stockholders be forced to pay for this frivolous litigation?

Wasteful Actions in Maryland State Court

To assure the votes are counted, after the March postponement we filed a Verified Complaint in the Circuit Court of Baltimore County, Maryland, bringing claims against China Fund and the members of the Board, with the goal of requiring the annual meeting to be held April 26, 2018. We should not have had to file this action.

The Board's response was to amend China Fund's bylaws in an attempt to retroactively permit its improper actions, and to delay the annual meeting for the second time, immediately prior to the Maryland court hearing in April, thus causing further wasteful legal costs and expenses for China Fund stockholders.

China Fund has notified the Maryland Court that under a specified condition (which was satisfied on April 26, 2018) China Fund will hold the vote for the election of directors on May 23, 2018. While this long overdue election would be welcome, we continue to be concerned that (i) China Fund Board will find another pretext for delay, (ii) if the City of London nominees are elected the Board will take some action to prevent the replacement of Joe Rogers and Richard Shore on the Board, and (iii) the Board will continue to prevent the counting of the stockholder vote on the termination of the investment manager.

We are Concerned the Board's Actions are Intended to Protect the Incumbents and the Status Quo, Not to Benefit Stockholders.

We have proposed two new Directors who have closed-end fund (CEF) experience, are fully independent and have committed to acting in the best interests of all stockholders.

We have proposed to terminate the investment management contract because the manager, Allianz, has performed poorly over the long-term.

The Board's ongoing posturing, multiple annual meeting postponements, entrenchment actions and never-ending litigation are extremely expensive and a waste of China Fund assets. These costs are reducing China Fund's NAV, with costs increasing on a daily basis as a result of the Board's actions, and gradually will erode the share price of China Fund. We believe these continued actions by the Board to block the stockholders' right to vote are undermining the quality and competitive position of China Fund in the marketplace to the detriment of the stockholders, the true owners of China Fund.

It is Time to End the Delays and Permit the Stockholders to Finally Vote on May 23, 2018 on the Election of Directors and to Terminate the Investment Manager.

No More Delays

No More Litigation

No More Waste of China Fund Assets

City of London is using all its efforts to compel China Fund to finally hold its annual meeting and count your votes! Stockholders are the true owners of China Fund, and we have the right to seek to improve our investment. You are being punished via the Board's endless litigation and legal fees seeking to prevent a stockholder vote. We question how many hundreds of thousands of dollars have been spent by the Board on legal fees and other expenses to prevent the stockholders' vote from being counted.

We continue to seek your support on the previously distributed BLUE proxy card (i) to elect two independent director nominees who will work to maximize the value of each stockholder's investment, and (ii) to terminate the investment advisory and management agreements with China Fund's current investment advisor. Your vote is crucial.

We encourage all China Fund stockholders to vote their shares on the BLUE proxy card. If stockholders have already voted China Fund's white proxy card, they can still vote the BLUE card. Every vote counts. China Fund stockholders have an opportunity to effect meaningful change by rejecting the China Fund Board's affront to stockholder rights.

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